Insurance industry’s gross premium income grows 65.6% in 5years

The Nigerian insurance industry’s gross premium income (GPI) rose by 65.6 percent from N372.4 billion in 2017 to N616 billion at the end of last year.

Data from the National Insurance Commission (NAICOM) show that during the period, the GPI growth rate was N14.2 percent in 2017; 14.5 percent in 2018 and 19.2 percent in 2017.

The 2020 financial year showed contraction, with the GPI rate at 1.2 percent and bouncing back to N19.7 percent in 2021.

Umaru Baba, head of Statistics Department at NAICOM, told journalists at a seminar in Lagos that the industry has proven to be one of the most resilient and fastest-growing sectors in the Nigerian economy despite its relative size.

“In the recent past especially, the last five-years, it defied several economic recessions and the effects of the global COVID-19 pandemic, at a period when other sectors of the economy pointed south,” he said.

Baba said the market, as measured by the industry GPI, has maintained a steady growth throughout the period of 2017 to the current year.

“Interestingly, the market recorded expansion in 2020 during the pandemic when the real GDP actually contracted (-1.9 percent) as was the case with most economies around the world,” he said.

He said the industry’s remarkable experience is even better situated when pictured relative to other jurisdictions in similar and/or emerging insurance markets.

Baba said: “In 2021 for instance, while the annual rate of premium growth in Nigeria stood at 19.7 percent, it was 12 percent in Tanzania, 18.5 percent for Egypt and about 7.6 percent in the emerging insurance market of Malaysia.

“It is apparent that the trend maintained a steady rise except in 2020 of which it took a v-shaped recovery thereafter, rebounded to about 20 percent in 2021.”

Given more highlights of the sector’s performance in 2022, Baba disclosed that the GPI stood at N223.8 billion in the first quarter of 2022, which was 6 percent growth on year on year (YoY) and N369.2 billion in the second quarter, indicating a 65 percent quarter-on-quarter growth and at about 20 percent YoY.

“Apparently, this is outpacing the real economic growth, which grew at just about 3.5 percent during the same period,” he said.

According to him, major drivers of the growth during the period of 2017–2021 were the special risk insurance of marine and aviation at about 169.6 percent per cent, miscellaneous insurance at 98.4 percent and life insurances at 71.3 percent.

“In 2022 however, fire insurance (32.5 percent) and life business (24.5 percent) recorded highest rates at the end of H1 period, YoY.”

Baba said that in 2020, the industry recorded a retention ratio of about 71.6 percent, higher than Australia’s 69.4 percent and Turkey’s 70.9 percent) and the developing market of Egypt (58.1 percent).

Regarding claims paid to customers, industry gross claims fluctuated over the period to peak at a growth proportion of 36.2 percent over the years, representing N336.8 billion in 2021 from N186.4 billion in 2017.

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The percentage net claims paid have, owing to improved market discipline and the approach of customer focused regulation, remained very high around 70 percent.

In 2019 however, while the gross claims reported declined by about 11 percent, the ratio of net claims paid stood at 69.3 percent.

In all other years except 2017 (67 percent), it was at least around 70 percent, with the highest recorded at about 84 percent in the first half of 2022.

In the pandemic year of 2020, despite macroeconomic challenges, about 70 percent of all reported claims were settled by insurers within the specified period, while the industry also remained profitable with loss ratios within the average range numbers, with highest in 2018 at 59.2 percent, according to Baba.

He said the insurance sector should be the future redeemer of the Nigerian economy, given its growth rate, pattern, resilience and yet untapped potential.

“Available data has shown that the industry sustained a higher growth rate than most other sectors of the economy and, always higher than the real GDP growth,” he said.